Do it!bambang-pramuka.blog.unsoed.ac.id/files/2013/11/ch... · To fi nd the inventory turnover...

Chapter 6

Do it!Hasbeen Company completed its inventory count. It arrived at a total inventory value of $200,000. As a new member of Hasbeen’s accounting department, you have been given the information listed below. Discuss how this information affects the reported cost of inventory.

1. Hasbeen included in the inventory goods held on consignment for Falls Co., costing $15,000.

2. The company did not include in the count purchased goods of $10,000 which were in transit (terms: FOB shipping point).

3. The company did not include in the count sold inventory with a cost of $12,000 which was in transit (terms: FOB shipping point).

Solution

Rules of Ownership

The goods of $15,000 held on consignment should be deducted from the inven-tory count. The goods of $10,000 purchased FOB shipping point should be added to the inventory count. Sold goods of $12,000 which were in transit FOB shipping point should not be included in the ending inventory. Thus, inventory should be carried at $195,000 ($200,000 2 $15,000 1 $10,000).

action plan✔ Apply the rules of ownership to goods held on consignment.

✔ Apply the rules of owner-ship to goods in transit.

Related exercise material: BE6-1, E6-1, E6-2, and Do it! 6-1.●✔

[The Navigator]

Do it!The accounting records of Shumway Ag Implement show the following data.

Beginning inventory 4,000 units at $ 3

Purchases 6,000 units at $ 4

Sales 7,000 units at $12

Determine the cost of goods sold during the period under a periodic inventory system using (a) the FIFO method, (b) the LIFO method, and (c) the average-cost method.

Solution

Cost Flow Methods

action plan✔ Understand the periodic inventory system.

✔ Allocate costs between goods sold and goods on hand (ending inventory) for each cost fl ow method.

✔ Compute cost of goods sold for each method.

Cost of goods available for sale 5 (4,000 3 $3) 1 (6,000 3 $4) 5 $36,000

Ending inventory 5 10,000 2 7,000 5 3,000 units

(a) FIFO: $36,000 2 (3,000 3 $4) 5 $24,000

(b) LIFO: $36,000 2 (3,000 3 $3) 5 27,000

(c) Average cost per unit: [(4,000 @ $3) 1 (6,000 @ $4)] 4 10,000 5 $3.60Average-cost: $36,000 2 (3,000 3 $3.60) 5 $25,200

Related exercise material: BE6-3, BE6-4, BE6-5, E6-3, E6-4, E6-5, E6-6, E6-7, E6-8, and Do it! 6-2.●✔

[The Navigator]

Do it!(a) Tracy Company sells three different types of home heating stoves (wood, gas, and pellet). The cost and market value of its inventory of stoves are as follows.

Cost Market

Gas $ 84,000 $ 79,000

Wood 250,000 280,000

Pellet 112,000 101,000

LCM Basis; Inventory Errors

The lowest value for each inventory type is: gas $79,000, wood $250,000, and pellet $101,000. The total inventory value is the sum of these amounts, $430,000.

Determine the value of the company’s inventory under the lower-of-cost-or-market approach.

Solution

(b) Visual Company overstated its 2011 ending inventory by $22,000. Determine the impact this error has on ending inventory, cost of goods sold, and owner’s equity in 2011 and 2012.

Solution

2011 2012

Ending inventory $22,000 overstated No effect

Cost of goods sold $22,000 understated $22,000 overstated

Owner’s equity $22,000 overstated No effect

Related exercise material: BE6-7, BE6-8, E6-9, E6-10, E6-11, E6-12, and Do it! 6-3.

action plan✔ Determine whether cost or market value is lower for each inventory type.

✔ Sum the lowest value of each inventory type to determine the total value of inventory.

action plan✔ An ending inventory error in one period will have an equal and opposite effect on cost of goods sold and net income in the next period.

✔ After two years, the errors have offset each other.

●✔ [The Navigator]

Gerald D. Englehart Company has the following inventory, purchases, and sales data for the month of March.

Inventory: March 1 200 units @ $4.00 $ 800

Purchases:

March 10 500 units @ $4.50 2,250

March 20 400 units @ $4.75 1,900

March 30 300 units @ $5.00 1,500

Sales:

March 15 500 units

March 25 400 units

The physical inventory count on March 31 shows 500 units on hand.

Do it! 1C O M P R E H E N S I V E

Do it!Early in 2012, Westmoreland Company switched to a just-in-time inventory system. Its sales, cost of goods sold, and inventory amounts for 2011 and 2012 are shown below.

2011 2012

Sales revenue $2,000,000 $1,800,000

Cost of goods sold 1,000,000 910,000

Beginning inventory 290,000 210,000

Ending inventory 210,000 50,000

Determine the inventory turnover and days in inventory for 2011 and 2012. Dis-cuss the changes in the amount of inventory, the inventory turnover and days in inventory, and the amount of sales across the two years.

Solution

Inventory Turnover

action plan✔ To fi nd the inventory turnover ratio, divide cost of goods sold by average inventory.

✔ To determine days in inventory, divide 365 days by the inventory turnover ratio.

✔ Just-in-time inventory reduces the amount of inven-tory on hand, which reduces carrying costs. Reducing inventory levels by too much has potential negative impli-cations for sales.

2011 2012

Inventory turnover $1,000,000 5 4 $910,000 5 7

ratio ($290,000 1 $210,000)/2 ($210,000 1 $50,000)/2

Days in 365 4 4 5 91.3 days 365 4 7 5 52.1 days

inventory

Related exercise material: BE6-9, E6-13, E6-14, and Do it! 6-4.

The company experienced a very signifi cant decline in its ending inventory as a re-sult of the just-in-time inventory. This decline improved its inventory turnover ratio and its days in inventory. However, its sales declined by 10%. It is possible that this decline was caused by the dramatic reduction in the amount of inventory that was on hand, which increased the likelihood of “stock-outs.” To determine the optimal inventory level, management must weigh the benefi ts of reduced inventory against the potential lost sales caused by stock-outs.


action plan✔ Compute the total goods available for sale, in both units and dollars.

✔ Compute the cost of ending inventory under the periodic FIFO method by allocating to the units on hand the latest costs.

✔ Compute the cost of ending inventory under the periodic LIFO method by allocating to the units on hand the earliest costs.

✔ Compute the cost of ending inventory under the periodic average-cost method by allocating to the units on hand a weighted-average cost.

Solution to Comprehensive Do it! 1

The cost of goods available for sale is $6,450, as follows.

Inventory: 200 units @ $4.00 $ 800

Purchases:

March 10 500 units @ $4.50 2,250

March 20 400 units @ $4.75 1,900

March 30 300 units @ $5.00 1,500

Total: 1,400 $6,450

Under a periodic inventory system, the cost of goods sold under each cost fl ow method is as follows.

FIFO Method

Ending inventory:

Unit Total Date Units Cost Cost

March 30 300 $5.00 $1,500

March 20 200 4.75 950 $2,450

Cost of goods sold: $6,450 2 $2,450 5 $4,000

LIFO Method

Ending inventory:

Unit Total Date Units Cost Cost

March 1 200 $4.00 $ 800

March 10 300 4.50 1,350 $2,150

Cost of goods sold: $6,450 2 $2,150 5 $4,300

Average-Cost Method

Average unit cost: $6,450 4 1,400 5 $4.607

Ending inventory: 500 3 $4.607 5 $2,303.50

Cost of goods sold: $6,450 2 $2,303.50 5 $4,146.50

Instructions

Under a periodic inventory system, determine the cost of inventory on hand at March 31 and the cost of goods sold for March under (a) (FIFO), (b) (LIFO), and (c) average-cost.


Comprehensive Do it! 1 on page xxx showed cost of goods sold computations under a periodic inventory system. Now let’s assume that Gerald D. Englehart Company uses a perpetual inventory system. The company has the same inventory, purchases, and sales data for the month of March as shown earlier:

Inventory: March 1 200 units @ $4.00 $ 800

Purchases: March 10 500 units @ $4.50 2,250

March 20 400 units @ $4.75 1,900

March 30 300 units @ $5.00 1,500

Sales: March 15 500 units

March 25 400 units

The physical inventory count on March 31 shows 500 units on hand.

Instructions

Under a perpetual inventory system, determine the cost of inventory on hand at March 31 and the cost of goods sold for March under (a) FIFO, (b) LIFO, and (c) average-cost.

Do it! 2C O M P R E H E N S I V E

action plan✔ Compute the cost of goods sold under the perpetual FIFO method by allocating to the goods sold the earliest cost of goods purchased.

✔ Compute the cost of goods sold under the perpetual LIFO method by allocating to the goods sold the latest cost of goods purchased.

✔ Compute the cost of goods sold under the per-petual average-cost method by allocating to the goods sold a moving-average cost.

Solution to Comprehensive Do it! 2

The cost of goods available for sale is $6,450, as follows.

Inventory: 200 units @ $4.00 $ 800

Purchases: March 10 500 units @ $4.50 2,250

March 20 400 units @ $4.75 1,900

March 30 300 units @ $5.00 1,500

Total: 1,400 $6,450

Under a perpetual inventory system, the cost of goods sold under each cost fl ow method is as follows.

FIFO Method

Date Purchases Cost of Goods Sold Balance

March 1 (200 @ $4.00) $ 800

March 10 (500 @ $4.50) $2,250 (200 @ $4.00)

(500 @ $4.50) $3,050

March 15 (200 @ $4.00)

(300 @ $4.50) (200 @ $4.50) $ 900

$2,150

March 20 (400 @ $4.75) $1,900 (200 @ $4.50)

(400 @ $4.75) $2,800

March 25 (200 @ $4.50)

(200 @ $4.75) (200 @ $4.75) $ 950

$1,850

March 30 (300 @ $5.00) $1,500 (200 @ $4.75)

(300 @ $5.00) $2,450

Ending inventory, $2,450 Cost of goods sold: $2,150 1 $1,850 5 $4,000

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⎧ ⎪ ⎪ ⎨ ⎪ ⎪ ⎩

⎧ ⎪ ⎪ ⎨ ⎪ ⎪ ⎩

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LIFO Method


March 1 (200 @ $4.00) $ 800

March 10 (500 @ $4.50) $2,250 (200 @ $4.00)

(500 @ $4.50) $3,050

March 15 (500 @ $4.50) $2,250 (200 @ $4.00) $ 800

March 20 (400 @ $4.75) $1,900 (200 @ $4.00)

(400 @ $4.75) $2,700

March 25 (400 @ $4.75) $1,900 (200 @ $4.00) $ 800

March 30 (300 @ $5.00) $1,500 (200 @ $4.00)

(300 @ $5.00) $2,300


Moving-Average Cost Method


March 1 (200 @ $ 4.00) $ 800

March 10 (500 @ $4.50) $2,250 (700 @ $4.357) $3,050

March 15 (500 @ $4.357) $ 2,179 (200 @ $4.357) $ 871

March 20 (400 @ $4.75) $1,900 (600 @ $4.618) $2,771

March 25 (400 @ $4.618) $ 1,847 (200 @ $4.618) $ 924

March 30 (300 @ $5.00) $1,500 (500 @ $4.848) $2,424



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Do it! ReviewDo it! 6-1 Chau Company just took its physical inventory. The count of inventory items on

hand at the company’s business locations resulted in a total inventory cost of $300,000. In re-

viewing the details of the count and related inventory transactions, you have discovered the

following.

1. Chau has sent inventory costing $26,000 on consignment to Nikki Company. All of this inven-

tory was at Nikki’s showrooms on December 31.

2. The company did not include in the count inventory (cost, $20,000) that was sold on Decem-

ber 28, terms FOB shipping point. The goods were in transit on December 31.

3. The company did not include in the count inventory (cost, $17,000) that was purchased with

terms of FOB shipping point. The goods were in transit on December 31.

Compute the correct December 31 inventory.

Do it! 6-2 The accounting records of Fernandez Electronics show the following data.

Beginning inventory 3,000 units at $5

Purchases 8,000 units at $7

Sales 9,200 units at $10

Determine cost of goods sold during the period under a periodic inventory system using (a) the

FIFO method, (b) the LIFO method, and (c) the average-cost method. (Round unit cost to near-

est tenth of a cent.)

Do it! 6-3 (a) Kiele Company sells three different categories of tools (small, medium, and

large). The cost and fair value of its inventory of tools are as follows.

Cost Fair Value

Small $ 64,000 $ 73,000

Medium 290,000 260,000

Large 152,000 171,000

Determine the value of the company’s inventory under the lower-of-cost-or-market approach.

(b) Sanchez Company understated its 2011 ending inventory by $31,000. Determine the impact

this error has on ending inventory, cost of goods sold, and owner’s equity in 2011 and 2012.

Do it! 6-4 Early in 2012, Paulo Company switched to a just-in-time inventory system. Its sales,

cost of goods sold, and inventory amounts for 2011 and 2012 are shown below.

2011 2012

Sales $3,120,000 $3,713,000

Cost of goods sold 1,200,000 1,425,000


Ending inventory 220,000 80,000

Determine the inventory turnover and days in inventory for 2011 and 2012. Discuss the changes

in the amount of inventory, the inventory turnover and days in inventory, and the amount of

sales across the two years.

Apply rules of ownership to determine inventory cost.

(SO 1), AN

Compute cost of goods sold under different cost fl ow methods.

(SO 2), AP

Compute inventory value under LCM.

(SO 4), AP

Compute inventory turnover ratio and assess inventory level.

(SO 6), AP

Problems: Set BP6-1B Titus Manin Black Limited is trying to determine the value of its ending inventory as

of February 28, 2012, the company’s year-end. The following transactions occurred, and the

accountant asked your help in determining whether they should be recorded or not.

(a) On February 26, Titus shipped goods costing $800 to a customer and charged the customer

$1,000. The goods were shipped with terms FOB shipping point and the receiving report

indicates that the customer received the goods on March 2.

(b) On February 26, Welliver Inc. shipped goods to Titus under terms FOB shipping point. The

invoice price was $450 plus $30 for freight. The receiving report indicates that the goods

were received by Titus on March 2.

(c) Titus had $650 of inventory isolated in the warehouse. The inventory is designated for a

customer who has requested that the goods be shipped on March 10.

(d) Also included in Titus’s warehouse is $700 of inventory that Ishii Producers shipped to Titus

on consignment.

(e) On February 26, Titus issued a purchase order to acquire goods costing $900. The goods were

shipped with terms FOB destination on February 27. Titus received the goods on March 2.

(f) On February 26, Titus shipped goods to a customer under terms FOB destination. The in-

voice price was $350; the cost of the items was $200. The receiving report indicates that the

goods were received by the customer on March 2.

InstructionsFor each of the above transactions, specify whether the item in question should be included in

ending inventory, and if so, at what amount.

P6-2B Achilles Distribution markets CDs of the performing artist Vandyver. At the beginning

of October, Achilles had in beginning inventory 2,000 of Vandyver’s CDs with a unit cost of $7.

During October Achilles made the following purchases of Vandyver’s CDs.

Oct. 3 3,000 @ $8 Oct. 19 3,000 @ $10

Oct. 9 3,500 @ $9 Oct. 25 3,500 @ $11

During October, 11,400 units were sold. Achilles uses a periodic inventory system.

Instructions(a) Determine the cost of goods available for sale.

(b) Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed

cost fl ow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods

sold under the FIFO and LIFO methods.

(c) Which cost fl ow method results in (1) the highest inventory amount for the balance sheet

and (2) the highest cost of goods sold for the income statement?

P6-3B Gacis Company had a beginning inventory on January 1 of 150 units of Product 4-18-15

at a cost of $20 per unit. During the year, the following purchases were made.

Mar. 15 400 units at $23 Sept. 4 350 units at $26

July 20 250 units at $24 Dec. 2 100 units at $29

1,000 units were sold. Gacis Company uses a periodic inventory system.

Instructions(a) Determine the cost of goods available for sale.

(b) Determine (1) the ending inventory, and (2) the cost of goods sold under each of the as-

sumed cost fl ow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of

goods sold under the FIFO and LIFO methods.

(c) Which cost fl ow method results in (1) the highest inventory amount for the balance sheet,

and (2) the highest cost of goods sold for the income statement?

P6-4B The management of Perrineau Inc. is reevaluating the appropriateness of using its pres-

ent inventory cost fl ow method, which is average-cost. The company requests your help in deter-

mining the results of operations for 2012 if either the FIFO or the LIFO method had been used.

For 2012, the accounting records show these data:

Determine items and amounts to be recorded in inventory.

(SO 1), AN

(b)(2) Cost of goods sold:FIFO $23,400LIFO $24,900Average $24,160

Compute ending inventory, prepare income statements, and answer questions using FIFO and LIFO.

(SO 2, 3), AN

Determine cost of goods sold and ending inventory using FIFO, LIFO, and average-cost with analysis.

(SO 2, 3), AP

(b)(2) Cost of goods sold:FIFO $98,500LIFO $111,200Average $104,880

Determine cost of goods sold and ending inventory, using FIFO, LIFO, and average-cost with analysis.

(SO 2, 3), AP

Inventories Purchases and Sales

Beginning (8,000 units) $16,000 Total net sales (180,000 units) $747,000

Ending (18,000 units) Total cost of goods purchased

(190,000 units) 468,000

Purchases were made quarterly as follows.

Quarter Units Unit Cost Total Cost

1 50,000 $2.20 $110,000

2 40,000 2.40 96,000

3 40,000 2.50 100,000

4 60,000 2.70 162,000

190,000 $468,000

Operating expenses were $130,000, and the company’s income tax rate is 40%.

Instructions(a) Prepare comparative condensed income statements for 2012 under FIFO and LIFO. (Show

computations of ending inventory.)

(b) Answer the following questions for management.

(1) Which cost fl ow method (FIFO or LIFO) produces the more meaningful inventory

amount for the balance sheet? Why?

(2) Which cost fl ow method (FIFO or LIFO) produces the more meaningful net income?

Why?

(3) Which cost fl ow method (FIFO or LIFO) is more likely to approximate the actual physi-

cal fl ow of goods? Why?

(4) How much more cash will be available for management under LIFO than under FIFO?

Why?

(5) Will gross profi t under the average-cost method be higher or lower than FIFO? Than

LIFO? (Note: It is not necessary to quantify your answer.)

P6-5B You are provided with the following information for Guillaume Inc. for the month

ended June 30, 2012. Guillaume uses the periodic method for inventory.

Unit Cost or Date Description Quantity Selling Price

June 1 Beginning inventory 40 $40

June 4 Purchase 135 44

June 10 Sale 110 70

June 11 Sale return 15 70


June 18 Purchase return 10 46

June 25 Sale 65 75


Instructions(a) Calculate (i) ending inventory, (ii) cost of goods sold, (iii) gross profi t, and (iv) gross profi t

rate under each of the following methods.

(1) LIFO. (2) FIFO. (3) Average-cost.

(b) Compare results for the three cost fl ow assumptions.

P6-6B You are provided with the following information for Dabinpons Inc. Dabinpons Inc.

uses the periodic method of accounting for its inventory transactions.

March 1 Beginning inventory 2,000 liters at a cost of 60¢ per liter.

March 3 Purchased 2,500 liters at a cost of 65¢ per liter.

March 5 Sold 2,200 liters for $1.05 per liter.



March 30 Sold 5,000 liters for $1.25 per liter.

(a) Gross profit:FIFO $311,600LIFO $301,000

Calculate ending inventory, cost of goods sold, gross profi t, and gross profi t rate under periodic method; compare results.

(SO 2, 3), AP, E

(a) (iii) Gross profit:LIFO $4,215FIFO $4,645Average $4,414.60

Compare specifi c identifi ca-tion, FIFO, and LIFO under periodic method; use cost fl ow assumption to justify price increase.

(SO 2, 3), AP, E

Instructions(a) Prepare partial income statements through gross profi t, and calculate the value of ending

inventory that would be reported on the balance sheet, under each of the following cost fl ow

assumptions. Round ending inventory and cost of goods sold to the nearest dollar.

(1) Specifi c identifi cation method assuming:

(i) The March 5 sale consisted of 1,100 liters from the March 1 beginning inventory

and 1,100 liters from the March 3 purchase; and

(ii) The March 30 sale consisted of the following number of units sold from beginning

inventory and each purchase: 450 liters from March 1; 550 liters from March 3;

2,900 liters from March 10; 1,100 liters from March 20.

(2) FIFO.

(3) LIFO.

(b) How can companies use a cost fl ow method to justify price increases? Which cost fl ow method

would best support an argument to increase prices?

P6-7B The management of Tamara Co. asks your help in determining the comparative effects

of the FIFO and LIFO inventory cost fl ow methods. For 2012, the accounting records provide

the data shown below.

Inventory, January 1 (10,000 units) $ 45,000

Cost of 100,000 units purchased 532,000

Selling price of 80,000 units sold 700,000

Operating expenses 140,000

Units purchased consisted of 35,000 units at $5.10 on May 10; 35,000 units at $5.30 on August 15;

and 30,000 units at $5.60 on November 20. Income taxes are 30%.

Instructions(a) Prepare comparative condensed income statements for 2012 under FIFO and LIFO. (Show

computations of ending inventory.)

(b) Answer the following questions for management.

(1) Which inventory cost fl ow method produces the most meaningful inventory amount for

the balance sheet? Why?

(2) Which inventory cost fl ow method produces the most meaningful net income? Why?

(3) Which inventory cost fl ow method is most likely to approximate actual physical fl ow of

the goods? Why?

(4) How much additional cash will be available for management under LIFO than under

FIFO? Why?

(5) How much of the gross profi t under FIFO is illusory in comparison with the gross profi t

under LIFO?

*P6-8B Ticotin Inc. is a retailer operating in British Columbia. Ticotin uses the perpetual inventory

method. All sales returns from customers result in the goods being returned to inventory; the inven-

tory is not damaged. Assume that there are no credit transactions; all amounts are settled in cash.

You are provided with the following information for Ticotin Inc. for the month of January 2012.

Unit Cost or Date Description Quantity Selling Price

January 1 Beginning inventory 100 $15

January 5 Purchase 150 18

January 8 Sale 110 28

January 10 Sale return 10 28


January 16 Purchase return 5 20

January 20 Sale 80 32


Instructions(a) For each of the following cost fl ow assumptions, calculate (i) cost of goods sold, (ii) ending

inventory, and (iii) gross profi t.

(1) LIFO. (2) FIFO. (3) Moving-average cost.

(b) Compare results for the three cost fl ow assumptions.

(a) (1) Gross profit:Specific identification $3,590

Compute ending inventory, prepare income statements, and answer questions using FIFO and LIFO.

(SO 2, 3), AN

(2) FIFO $3,791(3) LIFO $3,225

(a) Net incomeFIFO $105,700LIFO $91,000

Calculate cost of goods sold and ending inventory under LIFO, FIFO, and moving-average cost under the perpetual system; compare gross profi t under each assumption.

(SO 7), AP, E

Gross profit: LIFO $2,020 FIFO $2,420 Average $2,272

*P6-9B Cortez Co. began operations on July 1. It uses a perpetual inventory system. During

July, the company had the following purchases and sales.

Purchases

Date Units Unit Cost Sales Units

July 1 5 $120

July 6 4

July 11 7 $136

July 14 3

July 21 8 $147

July 27 6

Instructions(a) Determine the ending inventory under a perpetual inventory system using (1) FIFO, (2)

moving-average cost, and (3) LIFO.

(b) Which costing method produces the highest ending inventory valuation?

*P6-10B Bottitta Company lost all of its inventory in a fi re on December 26, 2012. The account-

ing records showed the following gross profi t data for November and December.

December November (to 12/26)

Net sales $600,000 $700,000


Purchases 377,000 424,000

Purchase returns and allowances 13,300 14,900

Purchase discounts 8,500 9,500

Freight-in 8,800 9,900

Ending inventory 36,000 ?

Bottitta is fully insured for fi re losses but must prepare a report for the insurance company.

Instructions(a) Compute the gross profi t rate for November.

(b) Using the gross profi t rate for November, determine the estimated cost of the inventory lost

in the fi re.

*P6-11B Farooqui Books uses the retail inventory method to estimate its monthly ending inven-

tories. The following information is available for two of its departments at October 31, 2012.

Hardcovers Paperbacks

Cost Retail Cost Retail

Beginning inventory $ 420,000 $ 700,000 $ 280,000 $ 360,000

Purchases 2,135,000 3,200,000 1,155,000 1,540,000

Freight-in 24,000 12,000

Purchase discounts 44,000 22,000

Net sales 3,100,000 1,570,000

At December 31, Farooqui Books takes a physical inventory at retail. The actual retail values of

the inventories in each department are Hardcovers $790,000 and Paperbacks $335,000.

Instructions(a) Determine the estimated cost of the ending inventory for each department at October 31,

2012, using the retail inventory method.

(b) Compute the ending inventory at cost for each department at December 31, assuming the

cost-to-retail ratios for the year are 65% for hardcovers and 75% for paperbacks.

Determine ending inventory under a perpetual inventory system.

(SO 7), AP

(a) Ending inventoryFIFO $1,029Avg. $994LIFO $958

Compute ending inventory using retail method.

(SO 8), AP

Compute gross profi t rate and inventory loss using gross profi t method.

(SO 8), AP

(Note: This is a continuation of the Cookie Chronicle from Chapters 1 through 5.)

CCC6 Natalie is busy establishing both divisions of her business (cookie classes

and mixer sales) and completing her business degree. Her goals for the next 11

months are to sell one mixer per month and to give two to three classes per week.

The cost of the fi ne European mixers is expected to increase. Natalie has just negotiated new

terms with Kzinski that include shipping costs in the negotiated purchase price (mixers will be

shipped FOB destination). Natalie must choose a cost fl ow assumption for her mixer inventory.

Go to the book’s companion website, www.wiley.com/go/global/weygandt, to see the completion of this problem.

Continuing Cookie Chronicle

Do it!bambang-pramuka.blog.unsoed.ac.id/files/2013/11/ch... · To fi nd the inventory turnover...

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